Exchange-traded funds provider Purpose Investments is expanding its product shelf after acquiring the retail assets of LOGiQ Asset Management Inc.
Purpose has agreed to pay $32.9-million to purchase LOGiQ's retail asset management, which offers retail mutual funds, closed-end funds, hedge funds and pooled funds to Canadian investors.
The deal will see Purpose add approximately $1.3-billion in assets under management to the already $3.4-billion in assets it manages in both mutual funds and exchange-traded funds.
The deal is expected to close at the end of December – subject to shareholder and regulatory approval.
LOGiQ launched last December after two well-known asset managers – Aston Hill Financial Inc. and Front Street Capital – decided to merge. Industry veteran Joe Canavan, former chief executive officer of Assante Wealth Management Ltd., was brought in as CEO to help salvage the two firms, both of which had plummeted in assets before the merger. (At the time of the deal, Aston's assets had slipped to roughly $2.2-billion from a peak of $7.7-billion in 2014.)
Less than a year later, LOGiQ is exiting the retail funds sector and will solely focus on its institutional global sales business, Mr. Canavan said. (The institutional side of the business manages approximately $3.6-billion in assets)
With fee compression and the need to build scale quickly, Mr. Canavan says he knew he had a short period of time to build a new asset manager with at least $10-billion in assets under management.
Last spring, Mr. Canavan had his eye on Sprott Inc.'s $3-billion mutual fund arm, but the deal never got off the table when Sprott decided to sell to its own executives.
"You have to grow bigger to survive in this industry, and the one thing that was very clear to me from the beginning was that I either had to buy assets – or look at another option," Mr. Canavan said.
"The retail funds industry is experiencing massive change and ongoing consolidation. We believe that as scale becomes critical for retail fund managers, the benefits of a larger platform such as Purpose's will translate into significant benefits for fund investors."
Consolidation continues to be rampant within the Canadian asset-management business.
Last Friday, Sun Life Financial Inc. announced its purchase of Excel Funds Management Inc., most well known among investors for its popular emerging-markets offerings; and earlier this summer, CI Financial Corp. struck a deal to acquire Sentry Investments Corp., valued at $780-million in cash and stock, merging two of the country's largest independent asset managers.
Purpose has been looking to strengthen its footprint in the Canadian investment industry. Last year, Purpose added to its fund lineup when it obtained Redwood Asset Management Inc., followed with a strategic partnership with OMERS Platform Investments, a branch of one of Canada's largest pension-fund providers.
OMERS announced a minority stake in Purpose Investments and while terms of the deal were not disclosed, it is expected for OMERS to grow its stake in Purpose over time, although only as a minority shareholder.
"We were looking to build out our active money-management side of the business and we felt that [the deal with LOGiQ] was one that would help expand our investment offerings as well as complement our existing Redwood line up quite nicely," said Som Seif, CEO and president of Purpose in an interview with The Globe and Mail.
Over the next several months, Mr. Seif will look to integrate the fund offerings and better align the investment products by making several enhancements such as lowering overall fees and introducing exchange traded fund classes of the acquired investment funds.
With files from Niall McGee and Joyita Sengupta